total $267.5 million. Obviously, $81.5 million of these cannot be financed within the balance of initial resources now available. These are projects which have reached the final stages of planning after many months-and, in some cases, years of consideration. In many cases, they are key parts of broader development plans, which would have to be reconsidered if the projects do not go forward. This process cannot be turned on and off at random. Lack of continuity means waste and ineffective development.

So far, all these contributing members of IDA except the United States have voted in favor of the proposal to increase the resources of IDA.

If the United States fails to approve the proposal, the other countries will be released from their commitments. Thus, this channel for mobilizing the resources of other industrialized countries for the aid effort on terms identical with our own contribution will be effectively blocked. This will make it difficult-if not impossible to negotiate further burden-sharing arrangements with other nations.

Accordingly, Mr. Chairman, I strongly urge early and favorable action by the House so that the IDA can continue uninterrupted its uniquely valuable operations. Thank you.

The CHAIRMAN. We will also insert in the record a letter dated April 30, 1970, from David Rockefeller, chairman of the board of the Chase Manhattan Bank.

(The letter follows:)

Hon. J. W. FULBRIGHT,

THE CHASE MANHATTAN BANK,
New York, N.Y. April 30, 1970.

Chairman, Senate Foreign Relations Committee, U.S. Senate, Washington, D.C. DEAR Mr. CHAIRMAN: I wish to state my wholehearted support for S. 3543 authorizing a three-year contribution of $100 million for Special Funds of the Asian Development Bank.

I consider the United States' participation in the Bank of major importance to our interests in that part of the world and I have followed with interest and much satisfaction the Bank's substantial achievements during the early years of its life. I believe that the United States Government should now join with other countries in strengthening the Bank's operations by making a contribution to its Special Funds to enable it to broaden its activities and enlarge its facilities for lending on concessional terms.

On my recent trip to Asia I was most impressed by the fine reputation which the Asian Development Bank has earned during its three years of operations. It is much respected in Asia and it has clearly won the confidence of donor countries who have already pledged resources for the Special Funds for the ADB. With France's joining the ADB, just about all of the industrialized countries which are members of the World Bank are now also members of the ADB. This, in my view, is as clear a demonstration as any that the Bank has gained the confidence of countries throughout the free world that it has a significant role to play in the economic affairs of Asia.

I have no doubt in my mind that to entrust funds to the ADB would be to place them where one has an assurance that they will be efficiently and constructively utilized to promote development in the Asian region.

Please accept this statement of my support for S. 3543 which I hope will be enacted as soon as possible.

With best regards.
Sincerely,

DAVID.

(Whereupon, at 1:10 p.m., the committee adjourned, subject to the call of the Chair.)

(The following are answers of the Department of the Treasury to committee questions.)

Question. What is the current U.S. position in the Fund and what has been the U.S. experience in using Fund resources?

Answer. The United States currently has a large "super gold tranche" position in the Fund. (The "super gold tranche" position is an automatic drawing right on the Fund which is measured by the extent to which the Fund's holdings of dollars falls below 75 percent of the U.S. quota. This "super gold tranche" is the result of prior drawings of dollars by other members.) As of February 28, 1970, the Fund holdings of dollars were 51 percent of the U.S. quota. This means that, as of that date, other Fund members had drawn over one billion of dollars from the U.S. dollar subscription, adding a similar amount to U.S. international re

serves.

From early 1964 to December 1966, the United States drew on the Fund to an aggregate amount of $1,840 million and Fund holdings of dollars reached 93 percent of quota at the end of 1966. Large borrowing abroad by American banks and corporations, during the past two years, tended to draw down dollar holdings of foreign central banks, and thus to provide the U.S. with official settlements surpluses. These surpluses permitted the U.S. to acquire a large super gold tranche, or net creditor position in the Fund. (See attached chart.) Foreign borrowing on the scale of the past two years may be replaced by net repayments to foreign countries in the future; in this event, the ability to draw on the Fund could prove useful to the United States. An enlarged quota will provide additional scope for such drawings if needed.

-2

-2

1947 47-54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

Note: Fund holdings of dollars equal to 75% of the U.S. quota represents a balanced position the U.S. naither is a creditor nor a debtor vis a vis the Fund.
Source International Monetary Fund, "International Financial Statistics"

Question. A number of criticims about the operations of the Asian Development Bank were made in the Jack Anderson column of April 7, 1970 in The Washington Post. Although we understand that the Treasury Department has already responded to such charges, would you please furnish this hearing record with as detailed comments as possible. Answer.

A. ASIAN DEVELOPMENT BANK INVESTMENTS

Under Article 21 of the Charter, the Bank invests "... funds not needed in its operations, in the territories of members in such obligations of members or nationals thereof as it may determine". Under a Resolution of the Board of Directors, these investments are limited to government or government-guaranteed obligations up to five years maturity and commercial bank deposits up to three years maturity.

As a prudent manager of funds derived from subscriptions and from its income, the Bank invests funds not immediately required for disbursement in its operations as best it can under these guidelines. As of December 31, 1969, the Bank had invested $225,777,246 of its funds in accordance with these guidelines. The Bank's income from investments in 1969 was $12,372,250 which was more than sufficient to defray the total expenses of the Bank during that year. The surplus has served to increase the Bank's capital resources for future use in financing the development of Asia.

Of the Bank's total investments, $96.5 million was invested in the United States. Most of this amount arose from subscription payments in U.S. dollars by countries other than the U.S. Total cash subscriptions paid in by the U.S. up to that date amounted to $40 million. (The $40 million paid in by the U.S. in the form of a non-interest-bearing letter of credit is not available for investment by the Bank.)

B. BORROWING BY THE ASIAN DEVELOPMENT BANK

The Asian Development Bank is modeled closely after the World Bank. Similar to the World Bank, it will depend in the future primarily on borrowings in international money markets to increase its lending from Ordinary Capital. The Bank's borrowings to date, $16 million equivalent in Deutschemarks in Germany and a $5 million equivalent issue in Austrian shillings in Austria, served to introduce ADB bonds to the capital markets of the world while the Bank took advantage of favorable market opportunities which developed in those countries. Even though the Bank still has uncommitted funds on hand from its paid-in subscriptions, it would be unwise to defer its borrowing program until the Bank's resources are depleted. With the final installment of paid-in capital from the subscription provided for in the Bank's charter coming up in August 1970, it is necessary for the Bank to begin to plan and to initiate a financing program by borrowing in the capital markets.

C. LEVEL OF ADB LOAN DISBURSEMENTS

As of December 31, 1969, the ADB had committed $139.7 million for loans ($117.7 from Ordinary Capital and $22 million from Special Funds). By April 15, 1970, its total loan commitments had increased to $163 million ($138 million from Ordinary Capital and about $25 million from Special Funds). These loan commitments were made during the second and third years of the Bank's operations, since its first year in operation was devoted to the task of setting itself up as a sound financial institution.

By the nature of the Bank's loans-which are for long-term development projects-actual disbursements may follow loan commitment by some time, owing to the natural time lag between loan commitment and actual expenditures. The Bank has disbursed $11.0 million under its outstanding loans. Disbursement may be expected to show a rapid increase in 1970 and in future years.

D. LEVEL OF BANK ACTIVITY

To date the Asian Development Bank has committed $163 million for thirty-one projects in thirteen countries. Of this total, $138.4 million was approved for loans from Ordinary Capital resources and $24.6 million for loans on concessional terms from Special Funds resources.

The Bank committed loan funds amounting to $42 million in 1968 and to $98 million in 1969. Loan commitments during 1970 are expected to total more than $200 million. It is anticipated that about thirty-five loans will be processed in 1970.

The Bank began its commitment of Special Fund resources on concessional terms in 1969, when $22 million was approved for loans to five countries, and a considerable expansion in this part of the Bank's activity is planned in 1970 and future years.

There has also been an increasing pace in the Bank's technical assistance activities. Commitments for technical assistance amounted to $1.3 million in 1968 and to $3.2 million in 1969 and are expected to rise further in 1970.

E. COMPARISON OF ASIAN DEVELOPMENT BANK WITH EXPORT-IMPORT BANK

The Asian Development Bank and the Export-Import Bank are two very different types of organizations. Comparing the ratios of administrative expenses or personnel to volume of business or profits for the two banks gives a distorted picture.

The Export-Import Bank is charged with assisting in the financing of United States exports. It finances commercial transactions and in a large share of its operations frequently provides financing in association with commercial banks. Accordingly, a great deal of responsibility for determining the viability of the transaction and credit worthiness of the buyer has been assumed by the United States exporter or his commercial bank. Moreover, many of the transactions financed by the Export-Import Bank are repetitive sales to established and wellknown buyers in foreign countries. The exporter himself is usually required to assume a percentage of the financial risk and is accordingly selective in choosing his customers.

In contrast, the Asian Development Bank itself, rather than the suppliers or other financial institutions, must finance the cost of appraising the viability and economic and technical feasibility of a project. The Asian Development Bank's operations require that its personnel, or consultants it may hire, spend a sufficient amount of time in examining a project in the recipient country concerned, and this kind of cost is very much less in the case of the Export-Import Bank which does not rely to the same degree on appraisal mission in the field.

Another extra cost which has to be incurred by the Asian Development Bank results from its very nature as an international institution. This requires travel and communication expenses in order to permit its member countries to play a significant role in policy formulation by allowing members of the Board of Directors to maintain continuous contact with the country or countries they represent on issues and project proposals. An additional cost for travel expenditure arises from the fact that the Asian Development Bank as an international institution draws its personnel from thirty different countries; this necessitates a cost, not found in the Export-Import Bank, in connection with their moving to Manils or returning to their home country.

These are some of the reasons why administrative costs for an international lending institution such as the Asian Development Bank would appear to be relatively higher than those for the Export-Import Bank whose operations are so very different. The Export-Import Bank is indeed to be complimented on its low ratio of administrative expenses, but it would be unrealistic to expect an international development institution to approach that ratio.

F. ADB REPRESENTATION EXPENDITURES

The costs of representation cover only those felt to be necessary in the conduct of the Bank's business as an international lending institution. They arise in connection with the Bank's dealings with member governments, borrowers, bankers and investment groups, and others. Representation costs are strictly regulated by the Bank's Administration Department.

Expenditures by the Bank for representation in 1969 amounted to $44,849. Most of these expenditures consisted of official hospitality provided by the Presi dent or Vice President of the Bank and at official receptions or dinners hosted by the Bank during conferences, signing ceremonies, and other official functions.

Representation costs incurred by staff members amounted to $18,828 of the above total, of which $6,317 was at headquarters and $12,511 was on business trips. These covered 195 occasions at headquarters and 396 occasions on business trips, amounting to an average of $32 per occasion.

The 1970 budget allows for an increase of only $5,000 in representation expenses, up to a total of $50,000 despite the expectation of a doubling of the Bank's lending activities this year.